Proposed changes to dividend tax could impact limited company buy to lets

Proposals from the Office for Tax Simplification (OTS) could increase the amount of dividend tax paid by landlords who operate their buy to let property businesses in limited companies. Andrew Turner, chief executive at specialist broker Commercial Trust Limited, looks at how these suggested changes might affect some buy to let landlords.

In recommendations that were published on May 25th, the OTS, an independent office of HM Treasury, which provides the Government with advice on simplifying the tax system, has acknowledged that tax paid on dividend income is materially less than other sources of income.

At the moment, basic rate taxpayers pay 7.5% tax on dividend income they receive, which exceeds the current £2,000 allowance. Higher rate tax payers pay 32.5%, while additional rate taxpayers pay 38.1%.

However, the OTS describes tax calculations on dividends as “complex” and, among its ideas, is one to tax dividends at the same rate as income.

In its report, it stated:

“A more radical option would be to end the differential tax rates for dividend income. If all taxable income was taxed at the same rates, it would not matter how the personal allowance was used. Making this change would have the effect of increasing the amount of tax due from those who receive amounts of dividend income above the allowance. It would also impact on the taxation of profit extracted as a salary or as a dividend, from family owned companies.”

If the Government was to make this change, landlords who are basic rate taxpayers, would see the amount of dividend tax they pay on their limited company properties increase to 20%, a rise of 125%, while for higher rate taxpayers, the increase would be 7.5% and for those in the highest rate tax band, there would be a 6.9% tax increase.

The limited company buy to let market has grown substantially in recent years. In April 2018, Moneyfacts reported that there was a record 235 fixed-rate buy to let deals available to limited companies.

It remains to be seen whether the Government will follow-through on the OTS proposals, but any changes could impact on limited company buy to let landlords.

Written by Andrew Pelis – [email protected]

EAN Content

Content shared by this account is either news shared free by third parties or sponsored (paid for) content from third parties. Please be advised that links to third party websites are not endorsed by Estate Agent Networking - Please do your own research before committing to any third party business promoted on our website.

You May Also Enjoy

Breaking News


Daily bite-sized proptech and property news in partnership with Proptech-X.   PRESS RELEASE: Backing by real estate market leaders ING Ventures, JLL Spark, Blackstone and Concrete VC will help accelerate PRODA’s efforts to scale its transformative rent roll data platform PRODA, the London-based data processing and analysis platform, has announced the completion of its Series A…
Read More
does a garage add value to your property
Home and Living

Does a Garage add Value to your Property?

The most important part of this subject, well leastways for me, is if you have the space / land available so to have the choice of either a garage or not. Surely this plot of land holds the value and it is over to the home owner if they would like a garage or not?…
Read More
Letting Agent Talk

How to Be an Awesome Landlord in 2022

Some people may view being a landlord as an easy way to make money, but there’s much more to it if you want to truly excel in this role. The best landlords always go above and beyond to provide comfortable homes for their tenants and make them feel as welcomed as possible. Indeed, to be…
Read More
Property for sale
Estate Agent Talk

Selling Your House? Here’s What You Need To Do

Selling your house is a big decision. It’s not something you do every day or even every year. So, when the time comes to sell, you want to make sure you’re doing it right. That means getting the best possible price for your home and making the process as smooth and stress-free as possible. So,…
Read More
Estate Agent Talk

What Are The Factors To Appreciates The Real Estate Property Prices

Are you planning to sell your home? Are you buying a home? Whatever the scenario is, there are some things that you need to look after. In case you are selling your house, you have to set the price on the basis of those factors, or you need to ensure that all these things are…
Read More
Breaking News


A roundup of the week’s top property and proptech news stories in partnership with Proptech-X   Table of ContentsHide On The Market: Housing market starts to rebalance as remarkable buyer and seller confidence prevails Renting to Students: TDS Poll Confirms Common Issues and Reasons for Disputes in Student Lets LexisNexis and Coadjute partner speeding property market…
Read More